HR-97-5: Published: Feb 1, 1997. Publicly Released: Feb 1, 1997.

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GAO reviewed the Department of Defense's (DOD) management of supplies that support the military services, focusing on DOD's need to be more aggressive in changing its management culture by taking advantage of new management practices, technologies, and logistics systems so that inefficiencies can be eliminated.

GAO found that: (1) DOD has clearly had some success in addressing its inventory management problems, but much remains to be done; (2) DOD has implemented, in a limited manner, certain commercial practices such as direct vendor delivery for medical and food items, however, these initiatives address only about 3 percent of the items for which this concept could be used; (3) DOD is in the midst of changing its inventory management culture and it has reduced its inventory since GAO's 1995 high-risk report; (4) however, GAO believes that much of the reduction was the result of reduced force levels, which reduced overall demands on DOD's logistics systems; (5) DOD has also made little progress in developing the management tools needed to help solve its long-term inventory management problems; (6) DOD has not achieved the desired benefits from the Defense Business Operations Fund, and the Corporate Information Management initiative has not produced the economies and efficiencies anticipated; (7) DOD also abandoned its initial strategy to deploy a set of integrated systems across all inventory control points and has embarked on a strategy to deploy the systems individually at selected sites without taking the steps necessary to ensure that the effort brings positive results; (8) as a result of the lack of progress with some of the key initiatives, it has become increasingly difficult for inventory managers to manage DOD's multibillion-dollar inventory supply system efficiently and effectively; (9) unless DOD takes more aggressive actions, its inventory management problems will continue into the next century; (10) in the short term, DOD needs to emphasize the efficient operation of its existing inventory systems; (11) in the long term, DOD must establish goals, objectives, and milestones for changing its culture and adopting new management tools and practices; and (12) continued close congressional oversight is key to helping to ensure that financial resources are not wasted through the acquisition of additional inventories that are not needed and that DOD obtains the tools necessary for efficient and effective inventory management.